Like it or not, the euro is doomed
NEW YORK ... As European leaders unveil their latest plan to solve the debt crisis, economists and market experts aren't convinced they'll actually be successful.
At least one group says there are one too many obstacles and chances are, the currency union will break up, triggering an end of the euro as we know it.
"Three years after the first 'once in a generation' financial crisis, we may now be entering the end game for a euro of 17 countries," said Graeme Leach, chief economist at the Institute of Directors, a London-based non-political organization comprising 43,000 business leaders worldwide, but primarily in the United Kingdom. Incidentally, the U.K. was also the one country that staunchly opposed the latest deal, with Prime Minister David Cameron saying, "What is on offer isn't in Britain's interests."
But questions remain about the role of the European Central Bank. The ECB has been buying debt on a limited basis, as part of an emergency program, but there have been calls for more aggressive action.
Leach argues that the collapse of the euro is inevitable without the ECB'svirtually limitless financial support.
ECB President Mario Draghi has firmly said, time and time again, that the central bank's only mandate is to prevent inflation.
"It's the ECB or bust," Leach said. "Unless the ECB begins to operate as a sovereign lender of last resort function, with massive purchases of eurozone public debt, the inexorable logic is that the eurozone will break up."
Germany has been strongly opposed to sending the ECB down a path of printing money to stabilize Europe's economy.
"Printing money is associated with hyperinflation, the collapse of the Weimer Republic, and the rise of Hitler," noted Leach. "From a German perspective the question is that, once the ECB has lost its virginity printing money, just how promiscuous could it become."
A break-up could result in very major recession in Europe, and so it's hard to imagine how any politicians and governments could possibly make a conscious, voluntary decisions to leave the eurozone," said Milligan. "The chances that the eurozone will remain intact over the next several months are high, but the danger could get worse over the next couple of years, as they try and transition toward any sort of fiscal union," said Milligan.
